I live in Hong Kong where I'm opening a branch office of my digital marketing firm MWI, which is headquartered in Salt Lake City, Utah. In addition to Forbes, my writing has also been published in Entrepreneur, Fast Company, VentureBeat, Business Insider, TechinAsia, and the South China Morning Post. I focus on entrepreneurship, startups, online marketing, and Asia. Born and raised through high school in Arcadia, California, I also spent two years at college in Idaho, two years in the Amazon as a missionary for The Church of Jesus Christ of Latter-day Saints (aka Mormons), and 15 years in Utah, first at Brigham Young University studying information systems management, and then working for various startups including a few of my own. In June, 2013 I moved to Hong Kong where I'm opening a branch office of my online marketing firm MWI and learning Cantonese and Mandarin with my wife and two children. My hobbies include skateboarding, triathlon, reading, and blogging. I write about entrepreneurship, startups, learning from success and failure, online marketing, innovation, and anything lean. If you have a question or suggestion, email me. I'm always looking for good ideas and great startups to write about.

3 Ways Hong Kong Can Attract Startups

Yesterday I met with Charles Ng, Associate-Director General at InvestHK, a government organization tasked with helping grow entrepreneurship in Hong Kong. Ng is a former business owner himself and no stranger to looking over a profit and loss statement. He is working in an exciting time as the number of startups in Hong Kong has grown rapidly over the past three years, and a potential slowdown in real estate and financial markets may drive capital into the laps of entrepreneurs. Ng and the government earnestly want to develop home-grown entrepreneurship as well as attract startups from other countries. InvestHK has recently launched a website at StartMeUp.hk along with various programs aimed at providing information and incentives to entrepreneurs considering moving to Hong Kong. Ng has been reaching out to the startup community, asking entrepreneurs what their top three ideas are to bring more startups to Hong Kong. When he put the question to me we were already short on time and I wasn’t able to give a complete response. Having slept on it I would now like to present my thoughts on the matter to Mr. Ng, the Hong Kong government at large, and other governments around the world.

Barriers To Entry

One of the first concepts I was exposed to when I began studying business at university was the idea that all businesses and industries have barriers to entry. Some companies require a lot of capital to start. Some do not generate profits for years. Some require specialized expertise. This is the nature of any environment in which businesses exist. In many cases, the largest barrier to entry is the local government. Imagine trying to open a libertarian-oriented magazine in China in 1985. Even outside totalitarian regimes, government is often the major hurdle with which entrepreneurs must deal. Hong Kong, which The Atlantic last year dubbed as “the most business-friendly city in the world,” (a rather relative term), is no exception. While being better than everyone else is good, being ideal would be best. And if Hong Kong is to attract entrepreneurs and startups to diversify its economy, it’s going to need to take bold steps to break down barriers to entry. Entrepreneurs won’t pay attention to anything less.

Step 1 – Simplifying The Visa Process

Securing a visa to live in Hong Kong took six months and cost approximately $5,000 USD for the services of a visa consultant. In fact, it wasn’t even until we talked to the consultant that we were able to figure out which visa we should apply for (in looking over the StartMeUp.hk website as well as InvestHK’s site I must admit they’ve made considerable improvements in clarifying this and other matters). InvestHK was very supportive and welcoming, but the feeling was that while that branch of government was very excited about me opening a branch office of my online marketing firm in Hong Kong, the immigration department was somewhat less enthusiastic. Don’t get me wrong, they were not rude. We were never treated poorly in any way. But the paperwork and process were thoroughly confusing. If Hong Kong wants to attract entrepreneurs they need to make the visa process fast, simple, and cheap. That means the entire process needs to go online (we had to fill out paper forms, some of which we had to mail internationally). And registering a business in Hong Kong and opening a bank account should not be required steps, especially since the bank of choice in the area, HSBC, requires that an individual show up in person in order to open an account. Yes, I had to travel to Hong Kong to open a bank account there, in order to get a visa.

I’m sure there are many consulting firms such as Accenture that could take care of revamping this process in a matter of months. Accenture will charge 50 times what the overhaul should cost, yet it will still be quite affordable and worth the return on investment when it comes to smoothing the visa process for entrepreneurs.

Step 2 – Eliminate Corporate Taxes On Startups

It is an economic rule that all other things being equal, you get less of what you tax. You also get less of what you threaten to tax. Politicians know that if you want people to quit smoking, you raise the tax on a pack of cigarettes. If you want more entrepreneurs, then lower the taxes they pay, or better yet, eliminate those taxes.

In his seminal work Innovation and Entrepreneurship, Peter F. Drucker proposed eliminating corporate taxes on new businesses. “What is needed in an entrepreneurial society is a tax system that encourages moving capital…rather than one that…prevents and penalizes it….”

Drucker proposed that new businesses enjoy a tax-free honeymoon of five to six years. For a government that wishes to grow its economy having such a tax-free period makes sense since fastgrowing startups aren’t generating much tax revenue for governments anyway. Startups invest the majority of their profits back into their companies. Governments lose little by foregoing this tax revenue while the incentive created by this tax-free period would cause companies to grow as quickly as possible, leading to larger tax revenues in the long run.

Eliminating taxes, along with auditing requirements, on startups would allow these fragile, new companies to focus their time, attention, and dollars on growing their businesses. Taxes and audits on these companies are distractions to the process of creating a company. By getting rid of these distractions Hong Kong can send a bold statement to startups that they are welcome here, and that the government recognizes the benefits entrepreneurs bring to society. Hong Kong can take the lead in this area and it requires no new bureaucracy, no new government department, and no outlay of cash. It may cost something in lost revenue, but that is more than made up for once these companies start paying taxes.

Step 3 – Publicity

Finally, if Hong Kong wants to grow its entrepreneurial ecosystem it needs publicity. Not the kind of trumped up publicity governments are famous for, but articles by real journalists who are writing about Hong Kong companies because there are exciting companies to write about. TechCrunch has published six stories having something to do with Hong Kong so far this year. Mashable has one, and it’s about Edward Snowden. These and other similar publications are what young entrepreneurs, the ones starting tomorrow’s companies, are reading, and in them Hong Kong is virtually nonexistent. Even the Wall Street Journal barely covers Hong Kong from an entrepreneurial perspective. In looking through articles from the Journal going back to April, 2013, only one article mentioned anything directly related to entrepreneurship, a presentation given by Jack Ma, founder of Alibaba, to young entrepreneurs in Hong Kong. If Hong Kong wants to attract startups, stories about successful local companies and entrepreneurs need to start showing up in these and other publications.

Challenges And Opportunities

Hong Kong has its other challenges when it comes to attracting entrepreneurs including expensive real estate, polluted air and water, and no Amazon Prime. But the opportunities far outweigh these detractors. Hong Kong is the gateway to Asia. The city is incredibly safe. Almost everyone speaks English. Hong Kong already has great fundamentals for startups. With a few more changes, the area could become the startup capital of the world.

If you’re an entrepreneur outside Hong Kong, what could Hong Kong do to get you to base your business here?

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I have a different opinion from yours as I have been in HK for 12 years. I believe that HK is actually in a very poor position for startups. It is a small market opportunity. If we look at it from a gateway perspective, then is it a gateway to china or rest of asia? If china, i would think the talent here in HK doesnt understand China. As for Asia, it doesnt have the tax treaties needed to operate with other countries.

I think it can serve as a gateway to all Asia. Having lived in the US most of my life, I’ve seen firsthand how most entrepreneurs limit their vision to the US. They’re building for the US market, and not considering the larger scope. Asia is considered a “niche” market despite being several times larger than the US. Just by virtue of moving to Asia my eyes have been opened to the many opportunities here that either; 1) have already been taken in the US, or 2) exist here but not in the US at all. Regardless of anything else, for only that reason alone I feel there is great potential in Hong Kong for both locals and expats, and I’ve seen it happening. In the short time I’ve been living in HK I’ve already met with several startups based here but which are doing business in China. Granted, these are primarily tech startups and the dynamics for tech startups are different than for manufacturing or other types of startups.

1. I’m in business for 10 yrs in Austria and plan to do so, so relocation is not an option, but a branch like you have going would be interesting

2. after doing a quick scan of that startmeup.hk site I am not sure where I actually am… looks like a mix of event and policital celebrity site, nothign that even touches my first questions as entrepreneur

3. questions were a) how does labor law work – compared to country US, AT, DE, UK, SK etc. b) what are typical salaries for job types developer, webmaster, marketer etc c) taxes – company and personal d) international tax treaties e) visa requirements for 1. entrepreneur 2. family 3. employee f) law basis – code law or common law – and on which basis (nobody invents law) g) where to work/live – company cluster/real estate/security/infrastructure/entrepreneural districs

got nothing answered within 5 minutes… just overly confused

I just remembered that I read some swiss site – and I believe it was this one here from one rather lower tax district in Switzerland – Zug

http://www.zg.ch/international/english

Look at it’s structure and compare to that .hk site and I guess you know which kind of information architecture I refer to

I should have been more clear. When it comes to doing business, just about everyone you deal with speaks English, at least well enough that you can easily start a company here without knowing any Cantonese.